Bitcoin prices in China dove 25% within two hours of the news. As you can see above, after prices on Mt. Gox, the biggest global trading platform, plunged nearly 30% from $1,238 earlier this morning, they have since bounced back—they’re now down about 12% from the morning’s high.
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That’s maybe because, in reality, China’s statement doesn’t change much.
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The government banned using virtual currencies in the real economy back in 2009, cracking down on surging transaction volume of Q Coin, Tencent’s virtual currency, had grown to several billions of yuan a year, growing at a rate of 15-20% annually. Some estimate it made up 13% of China’s cash economy prior to the crackdown.
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But that’s not the only reason the PBOC’s statement changes little about China’s appetite for bitcoin.
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First, it doesn’t alter the motivation. Though bitcoin could in theory function as a medium of exchange, few merchants in China accept it. Exceptions include e-commerce arms of Alibaba and Baidu, which are now banned. But it’s not the ability to buy Baidu’s firewall service drove a run-up like this